Traders Glossary

Explore, learn, and discover all trading-related terms here in our comprehensive glossary.

Limit Order

An order to buy at a set price which is at or below the current price of the security.An order to sell at a set price which is at or above the current price of the security.

Liquidity

The speed and ease with which an asset can be traded. Cash has the most liquidity of all assets whereas property (real estate) is one of the most illiquid assets.

Long

Being long means that you are a buyer of a security.

Long Call

Buying a call option.

Long Call Butterfly

A 3-leg direction-neutral, strategy, requiring low volatility, involving buying a low strike call, selling 2 middle strike calls with the same strike price and buying a higher strike call.

Long Call Condor

A 4-leg direction-neutral, strategy, requiring low volatility, involving buying a low strike call, selling 2 middle strike calls with different strike prices and buying a higher strike call.

Long Call Synthetic Straddle

A 2-leg direction-neutral, strategy, requiring high volatility, involving buying 2 ATM calls for every 100 shares (US stock options) sold, thereby replicating the risk profile of a Long Straddle.

Long Combo

A bullish strategy involving selling OTM puts and buying OTM calls in order to partially replicate a long stock position.

Long Iron Butterfly

A direction neutral strategy constructed by combining a Bull Put Spread with a Bear Call Spread or by combining a narrow Short Strangle with a wider Long Strangle.

Long Put

A bearish strategy, buying put options.

Long Put Butterfly

A 3-leg direction-neutral, strategy, requiring low volatility, involving buying a low strike put, selling 2 middle strike puts with the same strike price and buying a higher strike put.

Long Put Condor

A 4-leg direction-neutral, strategy, requiring low volatility, involving buying a low strike put, selling 2 middle strike puts with different strike prices and buying a higher strike put.

Long Put Synthetic Straddle

A 2-leg direction-neutral, strategy, requiring high volatility, involving buying 2 ATM puts for every 100 shares (US stock options) bought, thereby replicating the risk profile of a Long Straddle.

Long Stock

Buying shares.

Long Synthetic Future

Buying calls and selling the same amount of puts with the same strike and expiration date, effectively forming the same risk profile of buying a stock but with almost no cost.

MACD (Moving Average Convergence Divergence)

Measures the difference between 2 moving averages and is a measure of momentum. As the moving averages drift apart then momentum is increasing and vice versa. Best viewed as a bar chart. Divergence between MACD and price action can indicate a change of trend is imminent.

Margin

An amount paid by the account holder (either in cash or "marginable securities" which is held by the brokerage against non cash or high risk investments, or where the brokerage has lent the account holder the means to undertake a particular trade.

Margin Account

An account where the brokerage lends the customer part of the net debit required to make a trade.

Margin Call

Where the brokerage calls the account holder in order for them to pay more funds into their account to maintain the trade.Note that strategies that involve some form of unlimited risk often require a level of margin to be determined by the brokerage.

Margin Requirements

The amount of cash or marginable securities (eg blue chip stocks) which an account holder must have in his account in order to write uncovered (or naked) options.